Construction Prices Dampening Real Estate Market, Says Insider

Skyrocketing construction prices are the main roadblock to the development of new real estate projects, Tõnis Rüütel, managing director of the Association of Real Estate Companies, has said.

Speaking to ERR radio on the occasion of a March 29 real estate conference in Tallinn, Rüütel said that last year the market finally stabilized in the wake of the crisis. But whereas before solvency used to be the main issue, now growing construction costs were the real problem and the market is having a tough time deciding whether it can afford to build at current prices.

"But as the old saying goes, everything depends on where you're standing. The builders, by contrast, say that their prices fell a lot during the crisis and now they simply should rise. This is now the most sensitive subject," Rüütel said.

Rüütel noted that conditions for home loans were now very favorable at around 3 percent interest and that banks were more willing to give them out, albeit with more strict criteria than they did in the pre-crisis days.